mexico will pay for a border wall with the u.s. to build: we are going a wall. i can wait about a year and a half before we finish our negotiations with mexico which with john immediately after we get to office, but i do not want to wait. >> mexican leaders repeatedly said they will not pay for a raw -- a law. nominees to trump as his cabinet tomorrow, the senate intelligence committee will hold , originally set for today. facing lawmakers questions on capitol hill, he will appear before the housing urban affairs committee, the secretary of housing and urban development. trump has chosen david to have the department of veterans affairs. he is currently the secretary of health at the v.a., a budget of about $180 billion. he has previously been engulfed in controversy.

a new u.s. government report says afghan security sources still are not capable of securing a company by itself. it finds the country needs a stable security environment to prevent it from becoming attractive 12 -- al qaeda. leaving behind a small number of troops. and, hospitalized after falling ill on a return trip from a meeting in paris. and intelligence committee said and is innt surgery good condition and alert. he took over as premier last month after the previous government resigned. that power 24 hours by more than 2600 journalists and analysts in more than hundred 20 countries. this is bloomberg. ♪

scarlet: live, i am scarlet fu joe: i'm joe weisenthal. what did you miss? donald trump confronting some of his biggest political challenges just days before he becomes president, including hand over the business to his sons of weird a closer look at his conflict of interest. biotech shares plunging after trump called for more bidding. and rex tillerson is in the hot seat answer questions about his ties to russia in his confirmation hearing. ♪ look at where the

major averages stand as we head toward the close. abigail doolittle is standing by. abigail: we have the dow, s&p 500, and nasdaq, on pace for yet another record close, the longest such winning streak since 1999. but this does not tell the full picture. we saw a brief burst of volatility around a time president alleged trump's prescott has, stocks took a slight leg lower. they have now recovered. we see more of this uncertainty of volatility in other marketplaces. the biotech index in orange, this chart plunged, down about 4%. the worst day since brexit. we saw the bloomberg dollar index take a leg -- a leg lower. we have seen a little bit of a recovery here.

all the volatility of the other asset classes, those are foundational, suggesting more could be to come. whatuncertainty about trump will mean for the financial markets. we are seeing it in other asset classes. this is btv 86, a great chart. .e have the fix around stocks in purple, they have the bond volatility index and in white, the currency volatility index are we see the volatility is starting to be elevated. these are foundational asset classes, to the tale of stocks. the volatility increasing there may suggest stocks could follow suit at some point soon. finally, out of the election, we

are looking at financials on top but year to date, and interesting shift. energy on bottom and today, on the trump comments that the drug companies are getting away with murder, we have seen health care take a dip. it is now the best sector this year, tech. we see whether the trump trade will stay in place or whether we see a reversal. scarlet: thank you. let's turn to the big political story today, trump's first press conference since he was elected. the author of trump nation, the art of being the donald, published in 2005 and prompted a $5 billion lawsuit to donald trump. i did not pay a dime. it was more than i got but i did not have to pay anything in that case. >> that is good.

headlineour number one for this press conference? put instructure he will place leaves his sons in charge of the business. everything else are prophylactics that will not prevent him from take advantage of the office for financial gain. on other issues, it was a typical trump press conference. he wants to get rid of obama care but still does not have a detailed replacement ready for it. impact he has an on-the-job companies today. center atgs front and the beginning is whether the media is treating him unfairly about allegations among his intersection with russia. that will carry the news cycle for a few days. scarlet: him calling out certain networks or news organizations as well. highlight what he said

specifically about his job as president in the trump organization. mr. trump: i could run my business and government at the same time. i don't like the way that looks but i would be able to do that if i wanted to. i would be the only one who would be able to do that. as president, i could run the trump organization, a great company, and i could run the country. i would do a very good job. scarlet: a little bit of free association in his proclamations are he will hand it will -- he will hand it to his daughter and his son-in-law as well. what would a more extreme version of what he is proposing now look like? would he be completely selling his assets? >> i think the only way for him to have a clear slate coming sell thece is to

businesses. he has got about at least a billion dollars of debt spread across 150 financial institutions on wall street. , wellsck, deutsche bank fargo, on down the line. all of which she will regulate through the treasury department when in the white house. question theinto quality and intentions that affect all of the lenders at the center of the business. they will be at the center whether or not donald trump is involved. they will continue to intersect with those organizations, and that is a clear problem. tax policy will affect the business. the financial thing is a clear and looming problem. -- oes not get cleaned up >> something you wrote, there is a misconception according to you, that the trump empire, a

sprawling global entity, no way you could ever sell it, properties are everywhere and all kinds companies. small companya and it is pretty simple. he is not a local by any stretch. explain that. keeps referring to trump's vast empire. it is not vast nor an empire. he oftenof property, couple of golf courses in scotland and one in ireland and that is it. domestically, he owns one commercial building outright. and he does not own a land on the building. the condos have been sold off to various owners. it would not be as difficult for that business to be repackaged hisold off entirely and

lawyer said very unconvincingly during the press conference today. >> he gave a 20 minute speech or -- entation on reasons why >> he does not have assets or anything close to the standard oil. scarlet: let's listen. >> i am more concerned at -- than ever. he is not moving where he needs to move. he needs to get rid of his business and blind trust. classes will have to be congress. the thought is the present with touch so many topics and issues that inevitably, they would

encounter some sort. everyone is subject to the law except for the president and vice president. in lieu of that, with the president has done is to a blind trust. trump has a whole host of assets, unlike what they have had before. framework we want to have? it is a nonpartisan issue to me. vice president and the president going forward, to do last. chance of getting everything the gop congress unless the gop wants to play ball. joe: last night, extraordinary headlines out of cnn. then buzzfeed with the intelligence report.

>> is is what donald trump is good at. there has been a long summer of allegations. and i think some of them are unfair, he does not have it -- a history of dealmaking in russia. is unsophisticated about foreign policy and ill-informed. the danger here is the kremlin can play him by virtue of his ignorance. it is not by virtue of his wallet. overnight, information on the intelligence community about whether or not the russian government had, rising material on him. in a press conference, trump made the decision the centerpiece to his answer to the question about whether it is troublesome or whether he is

troubled by hacking. the substantive issue cap buried in the debate. fake news. he proceeded during his conference, a cnn reporter asked questions and he said i will not answer your russian. fake news, fake news, fake news. >> thanks for coming out. author of "trump nation," which had a lawsuit by donald trump. this is bloomberg. ♪

joe: last month passes nation --

return on investment from 7.5% to 7% over the next three years. over -- earlier today, eric the cio aboutith what the decision means for the $360 billion funds going over. >> the setting, discount rate, setting the assumed rate of return is really the highest decision our system has to make to protect the system, provide for the sustainability for generations to come. a very important and consequential decision. noting the exact number is an exact science. we think it is a reasonable number over the long-term. we lookg-term investor,

30 or 40 or 50 years. it really comes from our intermediate forecast. is up to you, it would it be lower? return is a powerful one. we live in a low rate world with low returns on risk-free assets. everything priced over. ask point percent assumed return. well-regarded investors gave some. a firm with which some investments think five or 5.5 is more realistic. >> we look at all that advice and the analysis as well. establishing our assumed rate of return, we took into account the low interest rate environment

you allude to. the fixed income portfolio would achieve about a 3.5 return about that time frame. >> i think that is reasonable. portfolio andur the assumptions that undergo it, we assume the global equity stock or foil would return about six and three quarters over the period.- 10 year i the intermediate period refer to earlier, those capital assumptions and up being a 6.2 number. i think that is a reasonable number over the intermediate from a expect returns broadly diversified portfolio. actuary's, they took the 10 year forecast and they look out 11-60.

in doing that, they assume some correction. it is reasonable we will have some return to normalcy in the environment. if and when that happens, we should expect a higher rate of return. put all that together in the analysis looking out over 60 years, is it reasonable to 7%ume we could achieve a return really premised on this time of getting a 6% return? the situation continues to be exacerbated. it makes your job nearly impossible. >> it makes it tough and challenging. this time in the next

10 years, we have quite a challenge in front of us. not only the market challenges, but the funding status or you 60 8% funded with a discount rate being lower, about 64% funded and we have to be careful with that. the demographics of the baby boomers retiring, the cash flow has turned negative. so it taking in less cash is a challenge and we have to pay attention to that. a lay we do that is invest for the long term but pay attention to where we could take some risk off the table, redeploy assets out of equities and into other asset classes we are taking advantage of opportunities to do that. >> let's talk about your critics.

returns over the past couple of years, well south of the new 7% target, our evidence that you and your investment team are failing and make use by of trying to panic advocating for a lower assumed rate of return than seven point set -- 7.5%. >> we are not panicked. returns are too low and others are staying it is too high. it is right about 7%. the five-year number is at 8%. also, times are important. is more likenumber five. a10 year number is more like 4.5. portfolioisk to the weany given year, we know

might underperform the 7% of her were over perform. our critics do not mention 8% we received three years ago. over a long time, percent return with a broadly diversified portfolio is reasonable and the 7% assumption over a long time. that was the cio of kelp are with erik schatzker earlier on bloomberg markets. we will now bring you a live shot of rex tillerson in the senate under questioning from senators. nominated by president-elect donald trump to be secretary of state. earlier in the day, he took a tough question for marco rubio about the issue of russia. loan -- hisis view

view on climate change came up. and trade. saying a twos state solution is a dream all should pursue. on the south china sea. coming up next, what do import prices tell us about what is coming for consumers? a trend that sheds light on that. this is bloomberg. ♪

scarlet: we are on small caps at home and abroad. according to michael, small caps out of the u.s. are due for a rebound. this shows the world small-cap index relative to the small-cap ratio. down, itline goes means small caps outside the usa are underperforming versus small caps in the united states. it is now at a 20 year low, this ratio.

that was recovery is the beginning of something bigger. he called it one of his 2017 risk traits. he sees a melt up in stocks and commodities before a meltdown. certainly a long potential if it ever turns round. we have been getting strong inflation data out of germany, and china. through the latest on import prices absolutely take off. you can see the white line over 3%, up overnight percent. consumer prices are still lacking though they tend to track themselves. it appears deflation basically everywhere is coming to an end. the question is how far to these go. helping asices also well. the markets close is next. let's look at the major indexes.

all three indexes are higher points, dow adding 88 getting ever closer to 28,000. the us he 500 massing by quarter of 1%. this is bloomberg. ♪

♪ scarlet: we are moments away

from the closing bell. "what'd you miss?" stocks rally after president trump's first press conference since his election. investors weighing his commitment to the economy and foreign relations. i am scarlet fu. joe: i am joe weisenthal. "what'd you miss?" welcome to our viewers live on twitter. coverage everyur weekday from 4:00 to 5:00 p.m. eastern. scarlet: the nasdaq closing for a fifth record day, or fifth day at a record. it has continued to move higher. all major benchmarks near session highs. joe: we saw a move into the red not long after the trump press conference. sectors, itterms of is driven by donald trump's comments. health care, look at that big leg lower around 11:30 a.m. or

so, when donald trump had critical words for the pharma industry, saying he would force companies to bid. if you look at the names , each down by more than 6%, almost 7%. etf that tracks biotech, off 3.4%. energy shares one of the big gainers as oil prices rallied during the news conference, xle up by better than 1%. exxon mobil, i added because rex tillerson is on capitol hill. the etf that tracks brazilian shares, they got a boost after brazil's central bank cut its benchmark interest rate by .75%.

this was not anticipated. look at the government bond market, here we go, not a ton of action in the u.s. year yields on change, 10 year yields down by a little bit, basically no action on the long end. in turkey, the turkish lira continues to plunge. a one year of turkish tenure yields, absolutely 6.0 9%, notp to 0.69 pretty for turkish 10 year yields. scarlet: in terms of currencies, come inside the bloomberg, the bloomberg dollar index erased its gains during the donald trump news conference,

recovered, then lost steam again , down .2%. mr. trump was silent on fiscal stimulus. we see some of those donald trump trades thing unwound. joe: look at the spikes up and down. mentioned and repeated his pledge to build a wall and make mexico pay for it, even after the wall is built. joe: a quick look at oilodities, oil and gold -- gaining 3% on report saudi arabia is cutting some of its boy them sales to china -- and volume salesm -- to china. on this nice, steady ascent. scarlet: it is because of the lunar new year.

those are today's market minutes. markets, ire on the want to bring in pacific heights asset manager, joining us from san francisco. lots of concerns right now in this market. we seem to have stalled out today, but it feels like the post-election rally has stalled a little bit. interest rates after spiking have declined again, so a lot of these post-election moves have stalled out or reversed. is this going to continue for a while? where do we go from here? withality is setting in the inauguration in nine or 10 days, so we go from optimism to the reality of getting policy and realizing some of these expected benefits to occur. since the election, you had

improving data in the third quarter, and hopefully that continues in the fourth, but you had a reevaluation of equity and bond markets based on the election results, the makeup of congress, and the expectation of better business environment, so pivoting to confirming those expectations. happen allnk it will at once, and the benefits will take a little bit to be realized. i wonder which asset classes leading. i we looking at the dollar? it was higher but lost ground during the news conference because there was no mention of fiscal stimulus. is that the driver for everything else? >> i don't know if it is the driver, but it is one of. so many things impact the dollar, interest rates, monetary

policy, so it is a major factor. the higher the dollar goes and the lower everybody else is, at may impact u.s. exports. if you have global growth and rising interest rates, the dollar will likely selloff, thereby improving that export picture for the u.s. there are a lot of different nuances to the dollar, but something to watch because it will impact how things go. valuationstalk about and what happens if rates keep going up. one of the arguments the bulls made for a long time were valuations were not to bad given , and low interest rates yet equities have an hardly affected at all. up, doeskeep going that cause pain for equity markets. >> i think the real issue is how

quickly interest rates go up, the shock factor or do they rise gradually? gradually rising interest rates are a healthy byproduct of a healthy economy. lows, maying off the be at the bond market rally, but i am not in the camp that if the tenure goes to 3% that the economy will crash. and it adjust3% properly, you still have economic growth. while that number would behind based on recent history, that would not be that high with broader historical numbers, so interest rates bear watching, why is moreease and important than the number. values,pect to equity we are in a revaluation system

where we will have to confirm the hope and optimism for some of these better business policies everybody has been talking about, and that confirmation will occur in the future. scarlet: there is also named checking by the president-elect. one of our bloomberg contributor's has put together a illustrates this. the oligarch index is a custom ,ndex made up of companies basically companies that donald trump has praised or sounded positive on. other index, the train the swamp index, amazon, boeing, gm, new york times, time warner, companies that he has disparaged one way or the other. followingimple as what donald trump says and buying or selling off that? >> if you are a traitor, that

presents short-term opportunities. we are long-term investors, and these tweets do not matter that much. for example, in the short-term, a comment about lockheed martin might drop the stock a couple of points, you get frustrated as an investor, but that is a great long-term growth story whether they are building aircraft, they will still be doing it and over time it is a great story. health care is still off a lot today, especially biotech, and that is a dynamic growth industry. opportunities,e but as a long-term investor, that is not a strategy i would use. the s&p 500 broadly speaking is fairly valued to maybe slightly richly valued now, so the next step will be our earnings growth , and we have to see earnings on theto rebalance

upside, and there have been estimates as to where those are going. mid singleing to 16,t growth, a multiple of 17, 18, depending on where you cut it. a lot of the potential gains are priced in. if you get really dynamic earnings growth, you can see multiple expansion and dynamic gains from here. joe: you make a good argument that we should not focus too much on a tweet about a specific company, but what about the fact that trump seems a very serious about this anti-trade, anti-globalization, anti-offshore strategy. he is consistent on his message. investors seem excited about tax .uts and rollbacks are they ignoring a lot of what he has talked about thematically, serious about changing trade policy in america? the details is in

on that sort of stuff, and i don't think we know enough to comment. it could he missed to go on headlines. the fact of the matter is a focus on u.s. interests and u.s. , and toes is a positive the extent you can entice businesses, there has been misplaced emphasis on donald tweets and companies jump to attention. he has been pushing a pro-american agenda, making america a better environment for companies to expand and grow through less taxes, better margins, less regulations, and to the extent you do that, companies will want to come here , and some of the trade issues, immigration issues, and in version issues go away because you made it attractive to do business here, and that is broadly where he is going, and i

think it is a positive in the long term. thank you very much. scarlet: we have some breaking news. johnson & johnson has acquire ay agreed to company according to bloomberg reporting. valuinge now focused on a new unit that would have research and development assets. j&j said to reach a tentative agreement on price. we will keep you posted on any further developments on j&j. health careow will companies deal with president-elect to donald trump, who stressed today that his administration will be a tough negotiating partner for the industry. we speak with david redfern. this is bloomberg. ♪

is bloomberg. we are looking at a live shot of rex tillerson responding to questions as he testifies as he goes about being confirmed for the secretary of state position. he has suggested the outgoing respondednistration -- we are continuing to follow the story and the confirmation hearings and will bring you the latest as those issues develop. president-elect donald trump in his first news conference since winning the presidency reiterated that repealing the affordable care act will be at the top of his agenda when he takes office. secretary is our approved, shortly thereafter, it

will be repealed and replaced. it will be essentially simultaneously. trump has cautioned republicans to let democrats take the blame for problems with the aca, and president obama's farewell address has become the most popular on the presidential account. he tweeted, "thank you for everything. my last ask is the same as my first. i'm not asking you to believe in my ability to create change, but yours." the message has been reach we've hundred thousand times. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. thank you so much. "what'd you miss?" pharmaceutical and biotech stocks took a dive when trump commented on pricing methods earlier today. >> they are getting away with

murder, farmer. pharma has a lot of lobbyists and power and very little bidding on drugs. we are the largest buyer of drugs in the world, and yet we don't it properly. we are going to start bidding and saving billions of dollars. scarlet: glaxosmithkline dipped in trading, 38% of revenue came from the u.s.. here to talk about what comes next is david redfern. thank you very much. i need to start on the present it lacks -- president-elect's comments. what kind of influence will he have over how drug companies pursue their strategy, how they price things? >> good afternoon. it has been very clear at the health conference all week that pricing is a big theme, and that continues today with mr. trump's remarks.

things,cts a couple of frankly some excessive pricing that has been well publicized, but also a general frustration with the whole health care system, the lack of transparency sometimes in it. we will have to see how it plays through. haveer many years now tried to take a responsible approach. we have priced all our new medicines at or below the prevailing medicines in the market, even if sometimes clinical data show superiority. is also worth remembering in this whole debate that the pharmaceutical industry does amazing things. hiv is a clear example. in 20 years, this industry has taken a death sentence and hiv to something that can be well

treated, well-managed on one pill a day and lead a normal lifespan. what is important and all this debate as it plays through is that innovation and the ability of the industry to innovate and price fairly to reflect an appropriate value for that medicine is still captured. joe: have you make a case politically that what you do is worth adding the prices that people pay for it? well, ultimately you have to demonstrate the value of your medicine through your clinical , increasingly real-world evidence, and the private sector is an important part of this. washington and through the farmer of association with our american pharmaceutical colleagues and peers, we will be advocating that very appropriately and very forcefully.

as i say, a big part is much bigger than the pharmaceutical industry it's self. it is part of a broader system, the lack of transparency, and the huge differences between list and net prices, so it needs a fundamental look at the whole system, and we are happy to be part of that debate. scarlet: we just broke the headlines that according to bloomberg reporting, johnson & johnson and actelion have agreed on a price to acquire actelion. what does that signal to you about the dealmaking environment. ? >> in terms of the general environment, i would expect more m&a this year. conditions are pretty well lined up for it. low financing costs, most big pharma companies chasing more growth. of course if there is the

overseas repatriation for american companies, that will field. we did -- fuel it. we did a big transaction with novartis and are pleased with the way that is going. that is going great. the integration on bottom line and topline is coming to extremely well, so we are still focused on that. so most of our activity as probably at an earlier phase of the pipeline, so we are betting dding down what we have done. washington,ack to one of the big debates is the future of the aca. a lot of questions about what it would be replaced with. ito, the timing, whether would be possible to repeal a's

he a and then wait while a replacement is figured out -- waitl aca and then while a replacement is figured out. >> there is a lot of speculation right now. i hope whatever happens, particular replacement measures for the 20 million who came into the system, they maintain that. hiv, several thousand new hiv positive patients were able to get , and itthrough the aca is important that is retained. beyond that, i think we will have to see how the details bleed through and whether it is repeal and replace at the same time or it is more staggered. i can't comment on all the

implications because there are so many moving parts. scarlet: very quickly, any programn developing a for zika? working onbviously that. we have a great platform that we can use for these pandemic outbreaks. we are also looking to be more generally prepared. i think what zika and ebola showed us and the pandemic flu is that the industry and the whole world has had a knee-jerk reaction and we have to run around, so we are looking actually to be working with all sorts of different partners, who and so forth, to have a much more prepared approach to the whole thing so we can react accordingly as these new viruses breakout. edfern.: david re

thank you very much. this is bloomberg. ♪

joe: i am joe weisenthal. "what'd you miss?" "what'd you miss?" let's take a deep dive into the bloomberg. let's start with bonds. i'm looking at an unprecedented level of interest rate risk. saying is what it is the degree to which the bond market is at risk due to higher rates, so there are various things that could affect the bond market, higher rates is one of them. ,here is a huge surge in risk people are piled into these rate sensitive products on the extreme long in. you wouldense that

expect this to generally trend higher. shock, youn upward can see a lot of people losing a lot of money. scarlet: it has come down from the peak of last year. joe: a little bit down. scarlet: you have the 10 year yields by telling at this point. the bond market is indicating some confusion here, not quite sure whether inflation is for real this time. next, we will hear from senator elizabeth warren about why she is so concerned about donald trump's conflicts of interest. this is bloomberg. ♪

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♪ grace and frankie, hemlock grove, season one of...! ♪ show me house of cards. finally, you can now find all of netflix in the same place as all your other entertainment. on xfinity x1. now at a liveking shot of rex tillerson, the nominee for secretary of state, at his confirmation hearings. earlier we heard from rex tillerson that islam is an "great faith" and does not support the blanket rejection because of their religion. president trump said he would implement a total ban on muslims entering the u.s.. trump has since proposed extreme vetting. hearing from tillerson about his connections to russia, taking a strong approach about how he would deal with russia going forward if he were to be confirmed as secretary of state.

there he had talked about benefits of a friendly relationship with that country. we are staying on top of the hearings and will bring you more details as they occur. donald trump has chosen a candidate for head of veterans affairs. that the a's system has a budget of $180 billion. it has recently been engulfed in controversy. a new u.s. government report says afghan security forces are still not capable of securing the company -- country by themselves. the country needs a stable security and environment to prevent it from again becoming attractive to al qaeda and other militants. it has been two year since nato-led forces with the true, leaving behind a small number of troops. the italian premier is hospitalized after falling ill on his trip in paris.

heitalian news agency says underwent surgery in rome today and is in good condition and alert. the 62 year old took over as premier last month after the previous government resigned. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. joe: thanks. kevin's are really caught up with elizabeth warren and discuss conflicts of interest for donald trump. kevin joins us with the highlights. thank you for joining us. fromdid you learn elizabeth warren? what is her perspective on trump's conflict of interest? >> she does not like donald trump's remarks at his press conference, and donald trump having laid out the steps he would take to what he said would allow a protection between his administration and the trump

organization, but she says it does not go far enough. take a listen. >> i am more concerned now than ever, because he is not moving where he needs to move, and that ,s we need to have him divest get rid of his business interests and put them and what is called a blind trust. crafts alongem a with people like senator elizabeth warren are saying that president-elect trump would need to have a blind trust. that policy,opt instead opting for a different approach, and receiving some criticism from democrats already. scarlet: very quickly, trumps pick for treasury secretary steve minutia and would divest his interest, so what is she worried about in terms of the track record? >> she says he is too familiar

with goldman sachs and big banks. >> he will be the chief financial officer for the united states of america. you approach profits? how do you approach making money? his answer was after a long time on wall street was to buy a bank after the financial crisis, one that had a big portfolio of loans that a lot of people had been tricked and cheated on, then aggressively to foreclose against those people. so elizabeth warren obviously coming out against all of president-elect's picks. i said you don't have any numbers in the senate to block these picks. she says it is about continuing to pressure republicans. she is clearly trying to find her role in this republican congress. joe: today, the senate confirmation hearings continuing, rex tillerson in the hot seat, what is the latest

going on there? >> i just hope to a senator who is a member of the committee. he is one of the republicans who has a lot of questions, like other senators, about tillerson's ties to russia. conversation with senator portman, he indicated he what bit satisfied with tillerson is testifying currently on capitol hill, so if you are a republican and watching this and hearing tillerson's testimony, he is doing what he needed to do, adopting a more aggressive tone against russia and i would expect he did the a job. you are feeling pretty good about his performance today on capitol hill. conflicts of interest, tillerson, steven mnuchin, or donald trump himself. like elizabeths

warren plan to do to keep them accountable in the likelihood of an actual conflict of interest. ? her that she is aware that because of the republican majority that it will be particularly tough for them to be able to block any of these nominees. sheerday on capitol hill, and other democratic colleagues had a briefing in which they try to raise these issues, if you will, but the bottom line is this, this is trumps washington. politicalnew landscape and one she is having to recalibrate herself or as she looks to position herself not only in the congress, but also a force within the democratic party. either way, she has assured me that she will not keep quiet on this, and i think we will be hearing more from people like senator elizabeth warren, and yes also, senator cory booker. joe: thank you very much. --rlet: brazil flashing

slashing its key interest rate in order to revive its economy. our next guest the joins us with his perspective. this is bloomberg. ♪

scarlet: "what'd you miss?" itsil unexpectedly slashed interest rate. although we have not seen a reaction in the currency, one etf took a leg up on the news right at 3:00 p.m. eastern time. the surprise here was the size of the rate cut. it was pretty aggressive, a

75-point basis rate cut. most including myself were looking for 50 basis points. they hinted at an acceleration, but to go from 25 to 75 is a big job. the economy is really in the doldrums. keep marking down their forecast for 2017-2018, so it is a good start, but they have a long way to go. mentioned inflation has been heading down. i have a chart here on the bloomberg, the brazil misery index, a crude way of assessing a nation's economy, unemployment plus inflation. it has come down, but still high. beyond the central bank move, what needs to happen to get things going and continue to improve the economy? >> structural reforms are a

tough road. a lot of the fiscal reforms have been watered down, some debt restructuring done at lean your terms, so it is a half-baked attempt. recession. deep on top of austerity measures with unemployment, it will be tough. joe: i have a question about those austerity measures. you see a country gets into trouble and the government has to do fiscal consolidation, how much is about the pure math, making sure there is enough money to pay the debt, and how much is the symbolism that fiscal consolidation is evidence of a government that basically promising everything to everyone, thus giving people the confidence to think there will be a stable hand on the economy? >> they are running a budget deficit 10% of gdp, so they need

to bring that down. lower interest rates help to service that debt, but debt is growing every year still. you are right about symbolism. we've come through several terms , waste,ption, misuse and he is trying to turn a corner. the problem with fiscal consolidation is that it is hard to do it. when things fall apart that they are forced to do that. it is very unpopular. scarlet: no elected leader wants to put themselves in that position. we said inflation has been coming down. versusar, 6.3 percent 10.7% in 2015, so a reflation story coming about, people expect them to export.

can we expect brazilian inflation to stay settled at these levels? >> it is going to be hard. year --r and early this , 2015, we saw a weaker currency, so there was negative feedback that caused a spike in inflation and central banks had to hike. now the strong currency is helping inflation come down. with prices going up, most of country is experiencing inflation. it may not come to fruition. to mexico,move mexican peso keeps getting hammered, the one thing that everyone got right, which is that trump would be a threat to the peso. , predictions, did not turn out right.

how much worse can this get? >> i think it can get a lot worse. the fundamentals of mexico are decent. turkey, you can see why turkey is going down. frustrating because the fundamentals are decent, but it is this uncertainty with the political change in the u.s. the game changer was the four decision to not build a plant -- ford decision to not build a plant. if you look at the charts, the peso had been firmer since the election, since then, off to the races, the dollar versus the mexican peso. like thise news coming ahead, and that is what markets are afraid of her at the peso is undervalued by any measure. fromump were to step back such an adversarial relationship with mexico, i think you would see a big rally in the peso. that is a big if.

at his press conference, he did not back down. the three big facets of his mexican platform, so far he is sticking with them. scarlet: mexico has no control. they just have to wait. what should or can the government do in the meantime to set itself up in a better position? should pursue better ties with canada or other countries? >> 85% of mexican exports go to the u.s., remittances and things like that. that is what is so earth shattering. lessve been closer for the to bring decades, and all of a sudden the u.s. is showing signs of stepping back and going the other way. to figure out what is actually going to happen, but because of the uncertainty, the markets are pricing in the

worst. bank hasthe central been selling dollars to intervene and support the peso. it has not worked. do they continue with business strategy? what is the alternative? >> it is unfair, central banks come under this is because this intervention did not work. they came out and said we are not to trying to strengthen the peso, but there has been such ill liquid markets, they are just trying to apply some fx liquidity. $175eserves are around billion. they hike rates aggressively. they may have to go before the next meeting. currencyking a foreign reserves, china at the top of everyone's mind these days, i'm interesting start to the year for the yuan with lots of

surprise moves. what is the trend? are we still in a general weakening trend? >> i believe we will continue to see weakness. thechinese have tweaked foreign exchange mechanism several times. they want the yuan to trade with market forces, and the yuan should continue that. they tweaked to the basket two weeks ago, lower the weight of the dollar. to me it is window dressing. the currencies will do what they want to do. if we want to illustrate the weaker yuan and capital outflows, the bars indicate capital outflows. it has been a long time since march 2014 cents we have seen the consistent outflow while the yuan continues to lose value against the dollar.

, theis it that xi jinping president of china, will be doing as he pushes ahead with leadership changes in china later this year? he like mexico has to wait to see what happens with trump. >> that is a good point. china is in the president-elect's sites. he has mentioned that several times. to me, china is trying to pursue stability. global investment, global backdrop, it is tricky for emerging markets. the capital outflows, again, it is reflecting wider em fund measures. it's not just china. we are having this rebound from global portfolios away from em into the u.s. and other markets. joe: he is staying with the

spirit we will talk about the turkish lira's drastic drop. this is bloomberg. ♪

scarlet: "what'd you miss?" rounding offira its biggest five-day loss since the global financial crisis. this follows a pledge by the central bank of turkey that did not have investors convinced. the turkish lira has dropped 7.7% of its value as its 10 year r yield has spiked by five basis points. that just exacerbates the move. for more,ng us , thank you forus joining us.

say people have not been paying attention at all, the turkish lira is getting clobbered, how would you describe the story? >> it is politics really. what has been happening in turkey, the coup, the violence going on, the terrorism, the war in southeast turkey, and a president who of thebe a figurehead moment who wants to have executive powers and is insisting on changing the constitution, insisting on influencing the economy, and making statements about what the central bank should be doing, so there are questions about whether the central bank is free to act to do anything about the drop in the lira. we repeat this over and over day after day, at some point, a weak currency will help the country, right? >> yes, but too much of a good

thing, as they say. it has gone beyond most metrics. it seems very overstretched. as you point out, the situation is terrible and is leading to a bad economic situation as well. when thingsle on are going -- i think this could keep going. were talking about the system, and it seems frequently there are headlines about president erdogan telling the banks to cut rates, stuff like that. none of it seems to be working. is the only hope that at some point he says the strategy i'm taking with regard to economic management is not working and i need to pull back on some of this stuff? >> the only hope is that there is a normalization of politics in turkey. right now, you have this overlay of the purge after the coup against what they call terrorists, where these people terrorists, we don't

know, but it is impacting every part of turkish and society, causing a lot of uncertainty, so it almost does not matter if it is fair to arrest them or kick them out of their jobs, it is impacting the government and the economy's ability to function. isrlet: we talk about how fx the first area where you see political risks priced in, more so than equities. in turkey, you have a populist leader. is this what populism looks like run amok? thats, what i would add is it has always been there in emerging markets, but when cash is flowing in and commodities or through the roof, growth is 8%, 9%, it masks a lot of stuff.

see the tide goes out, you which countries are really risky. politics is a much bigger story for emerging markets in 2017. joe: is this hurting president erdogan's popularity? >> it's hard to say. his share andng vote. last time, half the vote, so he is popular. afraid of, what he is concerned about, is that part of his reputation was based on the economy doing well, people feeling wealthier. if you talk to regular turks, people say i have a home now, drive a nice car, so he is worried that with this crisis, willconomic benefits become apparent to normal turks

that this is under threat. out andwhy he is coming being forceful and tsonga central bank must keep interest rates lower to encourage growth. scarlet: thank you so much for joining us. needcoming up, which you to know to gear up for tomorrow's trading day. this is bloomberg. ♪

scarlet: "what'd you miss?" the nasdaq climbed to a fifth straight high. confirmation hearings on capitol hill, dr. ben carson, nominee for secretary of housing and urban development. and the nominee for director of the cia. and don't miss this, initial jobless claims tomorrow morning at 8:30 a.m. janet yellen holds a meeting for educators tomo president-elect donald

trump took questions from the media for the first time since being elected.

mr. trump was grilled about his ties to russia, plans to repeal obamacare, and the fate of his business as once he is in office. the cabinet picks are back on capitol hill for cap -- confirmation hearings. cory booker testified against the confirmation of his , senator jeff sessions for attorney general. a first for u.s. politics. rex tillerson was grilled on everything from his relationship with russia to climate change. elaine chao also facing questions. mitchs married to mcconnell. she says as labor secretary -- served as labor secretary under george bush. the judge has formally sentenced dylan rough to death for killing nine black worshipers at